Luxury retailer Barneys New York will take over the long-vacated FAO Schwarz building on the corner of Stockton and O'Farrell streets in San Francisco, blotting out one of the last remnants of the economic recession in the Union Square shopping district.

On Tuesday, Barneys revealed plans to convert the three-level, 60,000-square-foot store into its fifth flagship location by next fall. The company also operates stores in New York, Beverly Hills, Chicago and Boston, and will open two more stores, one in Dallas and the other in Las Vegas.

"Opening a San Francisco flagship has been an objective of our company ever since Barneys ... commenced its expansion outside of New York several years ago," said Howard Socol, chairman and chief executive officer, in a statement. "We are thrilled to be able to make that dream a reality in a location in the heart of Union Square."

Barneys, established in 1923, is known for its high-end fashion, catering to a clientele willing to spend $1,130 for a silk tank dress by Dries van Noten or $485 for a pair of metallic slingback wedges.

For Union Square, the presence of Barneys signals yet another step toward full recovery after the dot-com crash, which had scared away businesses and created double-digit vacancy rates in the area.

FAO Schwarz, which had occupied 48 Stockton St. since 1989, closed in 2002. Its bright red sign and darkened windows served as a constant reminder of what once was. Although several other stores around it had also gone out of business, replacements eventually moved in, leaving the one corner of Stockton and O'Farrell streets particularly lonely.

"Anytime you have an empty storefront, it's a visual blight," said Linda Mjellem, executive director of the Union Square Association. "It's reminder that the area has fallen on hard times."

Barney's decision eliminates that reminder and exemplifies how far Union Square has come in the last few years. "We're really excited," Mjellem said. "We think (Barneys) is an excellent fit for the area. It'll give shoppers one more reason to come downtown or across the bay."

Last year brought a number of stores to Union Square, including Zara, Borrelli, Stuart Weitzman Shoes, Lucky Brand Jeans, Cody's Books and H&M. The shopping district is expecting two more additions this year: Mango and American Apparel. Meanwhile, the expansion of the nearby Westfield San Francisco Centre on Market Street is near completion, including a Bloomingdale's scheduled to open in the fall.

Rumors about Barneys coming to Union Square had been circulating for some time. The company had been negotiating a lease in San Francisco for 18 months.

Its parent company, Jones Apparel Group, is considering seeking a buyer. Bain Capital, a private-equity firm, is reported to be the lead contender to acquire the company.

In April, Jones Apparel reported first-quarter profit plunged by 70 percent, falling to $25.8 million (22 cents per share) from $87 million (71 cents) a year ago in the same period. The results included a $45.1 million loss from the sale of its Polo Jeans Co.

Same-store sales, sales at stores open at least a year, were up slightly, with an increase of 1 percent, excluding Barneys. Same-store sales at Barneys climbed 7 percent.

Jones Apparel is the fourth-largest apparel company in the country. Besides Barneys, it owns Nine West, Enzo Angiolini, Bandolino, Joan & David and Anne Klein, among others.

Barneys was acquired by Whippoorwill Associates and Bay Harbour Management in 1999, after being bailed out from bankruptcy proceedings. In 2004, Jones Apparel bought the company for $294.3 million in cash.